uploads///Warrants vs Alu

Aluminum Prices Are Supported by Canceled Warrants


Nov. 9 2015, Updated 1:38 p.m. ET

Copper hits one-week high

On Wednesday, November 4, 2015, LME (London Metal Exchange) 3M (three-month) copper rose 0.18% and closed at $5,134 per metric ton, creating a one-week high. After the four-week low in a disappointing previous week, LME 3M copper started the month on a positive note. Since the beginning of the month, copper rose 0.4%. COMEX (Commodity Exchange) copper also rose 0.5% in the week.

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Increase in aluminum canceled warrants

LME 3M aluminum, after two disappointing weeks in which it created a seven-year low, started to recover. Aluminum rose in the week ended November 6, 2015, due to the cancellation of warrants. LME 3M aluminum rose 0.2% on Wednesday, November 4, 2015, and closed at $1,504 per metric ton.

On November 4, 42% of total LME inventory was booked under canceled warrants. There has been a significant surge in canceled warrants of aluminum in LME inventories, which is a very positive sign for aluminum prices. The above graph shows the movement of canceled warrants and aluminum prices in LME.

Canceled warrants represent the stock booked for delivery and unavailable for trading. The falling commodity inventory levels and rising canceled warrants support commodity prices. LME inventory levels for aluminium were in a complete downtrend during the week and, combined with a surge in canceled warrants, gave support to aluminum prices.

LME 3M nickel has been consolidated from October 10 through October 30, 2015. The fall in nickel started on October 30, and by November 4, it had fallen 2%. On November 4, LME 3M nickel fell 0.4% and closed at $9,860 per metric ton.

LME zinc is trading at its lowest levels since October 8, 2015. It fell due to news of Glencore’s (GLEN) production cuts released on October 10. On November 4, LME zinc fell 0.7% and closed at $1,682 per metric ton.

LME 3M lead fell 0.4% on November 4 and closed the day at $1,680 per metric ton. Like zinc, LME 3M lead was also trading at its lowest levels since October 8. After falling in all trading sessions of the week ended October 30, tin is trading at price levels that are the lowest since September 23. On November 4, tin rose 0.17% and closed at $14,875 per metric ton.

Like base metals, major base metal mining companies such as Freeport-McMoRan (FCX), Alcoa (AA), and BHP Billiton (BHP) also showed mixed performances on November 4. That day, major base metal ETFs such as the SPDR S&P Metals and Mining ETF (XME) and the PowerShares DB Base Metals ETF (DBB) closed in the negative.


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